U.S. natural gas futures fell by more than 8% on Monday on forecasts for milder weather than previously expected for the rest of the month, erasing the previous session’s gains.
Gas futures for March delivery on the New York Mercantile Exchange fell 27.7 cents, or 8.1%, to $3.15 per million British thermal units (mmBtu), after earlier falling as low as $3.111 per mmBtu, its lowest since January 16.
On Friday, the contract hit $3.659 per mmBtu.
“The strong gas price advance through most of last week was obviously reversed by continued above normal temperature forecasts that have been extended into the last week of this month,” Ritterbusch and associates said in a note.
Meteorologists forecast warmer than normal temperatures nationwide through February 23, with Heating Degree Days falling from 374 on Friday to 358 on Monday. HDDs measure energy demand to heat buildings.
Colder weather earlier in the winter in the U.S. drove heavy withdrawals from underground storage, but forecasts now point to easing demand. A Reuters poll shows U.S. utilities likely withdrew 249 billion cubic feet (bcf) of gas in the week ended February 6.
This compares to a record 360 bcf pulled out of storage during the week ended January 30 to meet surging heating demand during an Arctic blast, putting stockpiles on track to drop from around 5% above normal during the week ended January 23 to around 6% below normal during the week ended February 6.
LSEG said average gas output in the Lower 48 states climbed to 106.99 billion cubic feet per day (bcfd) so far in February, up from 106.3 bcfd in January. That compares with a monthly record high of 109.7 bcfd in December.
LSEG projected average gas demand in the Lower 48 states, including exports, would fall from 142.5 bcfd this week to 130 bcfd next week.
Average gas flows to the eight large U.S. LNG export plants rose to 18.3 bcfd so far in February, up from 17.8 bcfd in January. That compares with a monthly record high of 18.5 bcfd in December.
“While we continue to cite an expected upswing in export activity to a record pace in the coming weeks/months, recent patterns strongly suggest that this increase in demand could be countered by stronger production now that well freeze-offs are being largely taken off the table as winter begins to wind down,” Ritterbusch added.
Dutch and British wholesale gas prices also fell on Monday morning on forecasts for milder temperatures.
(Reporting by Anjana Anil and Anmol Choubey in Bengaluru; Editing by Alexander Smith)